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Transphorm Reports Third Quarter 2020 Results and Continued Progress Across Business

·10 min read

Transphorm, Inc. ("Transphorm" or the "Company") (OTCQB: TGAN) —a pioneer in and global supplier of high reliability, high performance gallium nitride (GaN) power conversion products—today announced financial results for the third quarter ended September 30, 2020.

Recent Business Highlights

  • Secured new volume order with strategic adapter customer

  • Announced latest high voltage GaN quality and reliability (Q+R) data, including FIT rate of <1 failure per billion hours on more than 10 billion field hours of operation

  • Released second 900 V GaN Power FET device to production, for broad industrial and renewable energy applications

  • Released 4 kW analog-controlled bridgeless totem-pole GaN evaluation board for phase AC-to-DC power conversion solutions

"We continued to execute on our plans and make notable progress on our product development and design win traction during the third quarter, despite the challenging environment," said Mario Rivas, Transphorm’s CEO. "We have expanded our pipeline of customer engagements in the fast charging power adapter market and also broadened our portfolio of high-voltage GaN power conversion devices, all of which continue to demonstrate excellent reliability in the field. We believe Transphorm’s strong patent and product portfolio, partnerships and government programs uniquely position the Company for meaningful growth in the coming year."

Third Quarter of 2020 Results

Revenue was $1.9 million in the third quarter, compared to $1.0 million in the third quarter of 2019 and $6.3 million in the second quarter of 2020, which included $5.0 million in licensing revenue. For the first nine months of 2020, revenue was $9.4 million as compared to $2.0 million in the prior year period.

Operating expenses were $4.3 million in the third quarter, compared to $4.2 million in the prior quarter and $3.9 million in the third quarter of 2019. Third quarter 2020 operating expenses consisted of R&D expenses of $1.1 million and SG&A expenses of $3.2 million.

Net loss for the third quarter of 2020 was ($6.7) million, or ($0.19) per share, compared to a net loss of ($2.3) million, or ($0.06) per share, in the prior quarter and a net loss of ($5.4) million, or ($0.19) per share, in the third quarter of 2019. For the first nine months of 2020, net loss improved to ($13.2) million, or ($0.39) per share, from ($17.7) million, or ($0.63) per share, in the same period of 2019.

Cash and equivalents as of September 30, 2020 were $4.4 million, compared to $9.4 million as of June 30, 2020.

Conference Call

Transphorm will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review the Company’s third quarter results and provide a business update. The conference call will be webcast live over the Internet with an associated slide presentation, which can be accessed by all interested parties in the Investor Relations section of Transphorm’s website at www.transphormusa.com. Investors and analysts may also join the conference call by dialing 1-833-529-0218 and providing the conference ID 4159235. For those unable to attend the live webcast, a replay and the supporting presentation materials will be available on the day of the conference call and for approximately 90 days in the Investor Relations section of the Company’s website. Additionally, a telephone replay of the conference call will be available approximately two hours after the conclusion of the call and through November 17, 2020. The telephone replay can be accessed by dialing +1-416-621-4642 and entering the conference ID 4159235.

About Transphorm

Transphorm, Inc., a global leader in the GaN revolution, designs and manufactures high performance and high reliability GaN semiconductors for high voltage power conversion applications. Having one of the largest Power GaN IP portfolios of more than 1,000 owned or licensed patents, Transphorm produces the industry’s first JEDEC and AEC-Q101 qualified high voltage GaN semiconductor devices. The Company’s vertically integrated device business model allows for innovation at every development stage: design, fabrication, device, and application support. Transphorm’s innovations are moving power electronics beyond the limitations of silicon to achieve over 99% efficiency, 40% more power density and 20% lower system cost. Transphorm is headquartered in Goleta, California and has manufacturing operations in Goleta and Aizu, Japan. For more information, please visit www.transphormusa.com. Follow us on Twitter @transphormusa.

Forward-Looking Statements

This press release contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the Company’s technology and product offerings, industry acceptance of GaN technology, and the Company’s pipeline and future anticipated growth. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as "may," "will," "should," "would," "expect," "plan," "believe," "intend," "look forward," and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: risks related to Transphorm’s operations, such as additional financing requirements and access to capital; competition; the ability of Transphorm to protect its intellectual property rights; and other risks set forth in the Company’s filings with the Securities and Exchange Commission. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Transphorm, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share and per share data)

September 30, 2020

(Unaudited)

December 31, 2019

Assets

Current Assets

Cash and cash equivalents

$

4,369

$

2,875

Accounts receivable, net, including related parties

1,125

709

Inventory

1,372

990

Prepaid expenses and other current assets

1,743

783

Total current assets

8,609

5,357

Property and equipment, net

1,432

1,770

Goodwill

1,362

1,325

Intangible assets, net

1,062

1,313

Other assets

401

497

Total assets

$

12,866

$

10,262

Liabilities, convertible preferred stock and stockholders’ deficit

Current liabilities:

Accounts payable and accrued expenses

$

2,687

$

2,383

Deferred revenue

178

Development loan

10,000

5,000

Revolving credit facility, including accrued interest

10,153

10,458

Unfunded commitment to joint venture

1,684

1,688

Accrued payroll and benefits

1,325

1,159

Total current liabilities

26,027

20,688

Development loans, net of current portion

10,000

Promissory note

16,327

16,169

Total liabilities

42,354

46,857

Commitments and contingencies

Convertible preferred stock:

Series 1, $0.0001 par value; no shares authorized, issued and outstanding as of September 30, 2020; 12,438,704 shares authorized and 12,433,953 shares issued and outstanding as of December 31, 2019

39,658

Series 2, $0.0001 par value; no shares authorized, issued and outstanding as of September 30, 2020; 7,507,699 shares authorized and 7,499,996 shares issued and outstanding as of December 31, 2019

30,000

Series 3, $0.0001 par value; no shares authorized, issued and outstanding as of September 30, 2020; 4,000,000 shares authorized, issued and outstanding as of December 31, 2019

16,000

Total convertible preferred stock

85,658

Stockholders’ deficit:

Common stock, $0.0001 par value; 750,000,000 shares authorized and 35,266,496 shares issued and outstanding as of September 30, 2020; 29,012,034 shares authorized and 4,220,998 shares issued and outstanding as of December 31, 2019

4

Additional paid-in capital

128,385

22,404

Accumulated deficit

(157,112

)

(143,915

)

Accumulated other comprehensive loss

(765

)

(742

)

Total stockholders’ deficit

(29,488

)

(122,253

)

Total liabilities, convertible preferred stock and stockholders’ deficit

$

12,866

$

10,262

Transphorm, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenue, net, including related parties

$

1,929

$

994

$

9,358

$

2,011

Operating expenses:

Cost of goods sold

2,043

1,625

4,746

4,211

Research and development

1,071

2,041

4,131

6,245

Sales and marketing

547

572

1,593

2,098

General and administrative

2,688

1,270

7,838

4,015

Total operating expenses

6,349

5,508

18,308

16,569

Income (loss) from operations

(4,420

)

(4,514

)

(8,950

)

(14,558

)

Interest expense

191

191

569

567

Loss in joint venture

1,943

777

5,218

3,004

Changes in fair value of promissory note

709

17

46

101

Other income, net

(523

)

(53

)

(1,586

)

(513

)

Loss before tax expense

(6,740

)

(5,446

)

(13,197

)

(17,717

)

Tax expense

Net loss

$

(6,740

)

$

(5,446

)

$

(13,197

)

$

(17,717

)

Net loss per share - basic and diluted

$

(0.19

)

$

(0.19

)

$

(0.39

)

$

(0.63

)

Weighted average common shares outstanding - basic and diluted

35,156,918

28,153,555

34,072,176

28,153,555

Transphorm, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

Nine Months Ended September 30,

2020

2019

Cash flows from operating activities:

Net loss

$

(13,197

)

$

(17,717

)

Adjustments to reconcile net loss to net cash used in operating activities:

Inventory write-off

274

Depreciation and amortization

632

920

Licensing revenue from a related party

(5,000

)

Stock-based compensation

820

435

Interest cost

(193

)

455

Loss in joint venture

5,218

3,004

Changes in fair value of promissory note

46

101

Changes in operating assets and liabilities:

Accounts receivable

(562

)

(45

)

Inventory

(656

)

(288

)

Prepaid expenses and other current assets

(965

)

(236

)

Other assets

96

(51

)

Accounts payable and accrued expenses

304

(766

)

Deferred revenue

178

3,000

Accrued payroll and benefits

166

(136

)

Net cash used in operating activities

(12,693

)

(11,324

)

Cash flows from investing activities:

Purchases of property and equipment

(46

)

(155

)

Investment in joint venture

(5,327

)

(1,696

)

Net cash used in investing activities

(5,373

)

(1,851

)

Cash flows from financing activities:

Proceeds from development loans

13,000

Proceeds from stock option exercise

32

Payment for repurchase of common stock

(211

)

Loan repayment

(50

)

Proceeds from issuance of common stock, net of offering cost

19,741

Net cash provided by financing activities

19,512

13,000

Effect of foreign exchange rate changes on cash and cash equivalents

48

17

Net increase (decrease) in cash and cash equivalents

1,494

(158

)

Cash and cash equivalents at beginning of period

2,875

3,069

Cash and cash equivalents at end of period

$

4,369

$

2,911

Supplemental disclosures of cash flow information:

Interest expense paid

$

762

$

496

Supplemental non-cash financing activity:

Development loan reduction related to licensing revenue

$

5,000

$

View source version on businesswire.com: https://www.businesswire.com/news/home/20201110006171/en/

Contacts

Investor Contacts:
Shelton Group
Brett Perry | Leanne Sievers
1-214-272-0070 | 1-949-224-3874
sheltonir@sheltongroup.com

Company Contact:
Cameron McAulay
Chief Financial Officer
1-805-456-1300 ext. 140
cmcaulay@transphormusa.com